Encana selling Louisiana assets for $850 million

Encana (ECA – Get Report) stock is gaining by 9.09% to $6.36 in mid-morning trading on Tuesday, after the company agreed to sell its Haynesville, La. natural gas assets to GEP Haynesville for $850 million.

Inc.is making the deal with GEP Haynesville LLC (GeoSouthern), a joint venture of GeoSouthern Haynesville LP and funds managed by GSO Capital Partners LP. Encana will also transport and market GeoSouthern’s Haynesville production on a fee for service basis for five years as part of the agreement. It plans to focus more than 80% of its 2015 capital spending on its four most strategic assets in the Permian, Eagle Ford, Duvernay and Montney formations.

“This is another step in advancing our strategy”, Encana president and CEO Doug Suttles said in a statement.

British insurer RSA said on Tuesday it had received a revised proposal from rival Zurich Insurance Group for an all-cash offer at 550 pence a share, valuing the company at around 5.5 billion pounds ($8.69 billion). The Canadian company said it would use the cash from the sale, as well as savings from the footprint reduction, to cut debt.

Oil Search Ltd said it is looking for acquisitions in Papua New Guinea, where it holds the bulk of its assets, but Managing Director Peter Botten said deals may take some time as buyer and seller expectations remain wide apart. “This transaction delivers significant proceeds that we’ll use to strengthen our balance sheet”. The analysts believe additional divestitures could include San Juan and DJ Basin assets. “In addition, it eliminates our midstream commitments in the Haynesville and captures ongoing revenue upside through a gas marketing arrangement”.

The properties, located in DeSoto and Red River Parishes, Louisiana, total 112,000 net acres and 300 wells in the Haynesville Shale.

“However, one transaction does not make a trend and some investors may question if there is an appetite for more of the same”, Kistler said.